Last Wednesday’s release of proposed budget adjustments to meet Governor Culver’s 10 percent across the board cut has ended a week of nervous waiting for those Iowans involved with the Department of Human Services. For many the wait was the easy part as they will face reduced or eliminated funding in the remaining months of FY 2010.

As with any change in the Department’s budget, the bulk of the savings is coming from Medicaid. DHS had already projected that the state would have a $60 million balance in the program at the end of FY 2010, thanks to the enhanced federal match rate and additional pots accessed due to increasing unemployment. Instead of holding onto this money for FY 2011, DHS has proposed to use $53.5 million of the surplus to cover part of the shortfall. Most provider groups did not escape the budget knife, as DHS proposed to cut rates by 5 percent. Providers like dentists and HCBS waiver services would have their rates cut by just 2.5 percent. And a lucky few, including ICF/MR’s, AEA’s, critical access hospitals, federally qualified health centers, and schools would not have any reduction in rates.

No group of health care providers would be hit harder under the Department’s proposal than chiropractors, as the Department would eliminate chiropractic services from the Medicaid program completely.

Another hard hit group would be pharmacists. Not only would the prescription fill fee be reduced by 5 percent, but the allowable cost for brand name drugs would be reduced by 5 percent. This would follow federal action based on a law suit against drug pricing companies. More savings would be obtained via the preferred drug list by including mental health drugs on the list. The amount the state pays for generic drugs would be reduced. In describing this move, DHS says “profit margin will be decreased.”

Nursing homes would also be hit hard by the cuts. On top of the 5 percent reduction in their daily rate, the state would increase the minimum occupancy rate. Right now, in order for a nursing home to get full reimbursement it must have at least 85 percent of its beds filled. DHS wants to raise this requirement by an unspecified amount. The state would also reduce what it pays to a nursing home to hold a bed when a Medicaid resident is at the hospital. And performance incentives would not be funded by the General Fund, but by the proceeds from the Quality Assurance Assessment if it is approved by the Federal government. This would reduce the funding available for other items like higher daily rates.

Among the non-Medicaid groups that would be hardest hit by these cuts are services for troubled youths. DHS proposes to reduce reimbursement rates for child welfare and juvenile justice programs by ten percent. The Department is also proposing to eliminate juvenile drug courts. They are doing this based on a review by the Division of Criminal and Juvenile Justice Planning that found the program was having no impact in reducing recidivism amongst juveniles on drugs.

Foster families and those families with state-placed adoptions would see their support payments reduced by five percent.

The DHS institutions at Independence, Toledo, and Eldora will feel the most from job cuts. The Department is recommending to combine the child and adolescent mental health units at Independence MHI. This will result in the loss of 20 fill positions. At the State Training School, the special needs unit would be closed. Eldora would lose 10 filled positions and 19 vacant positions in this move. And at the Iowa Juvenile Home would close one of the female units, as Toledo would lose 18 filled positions and 5 vacant FTE’s.

Mental health services funded by the counties will also take a 10 percent reduction. The total amount of lost mental health funding is over $16 million. Since most of these funds go out in two separate payments, counties will see their second half share reduced by 20 percent after the new year.

Counties would also be hit by a recommendation that the state’s share of juvenile detention funding be reduced by $1 million. Such a change would likely result in higher property taxes for many Iowans.

The Department also recommended that the implementation of a number of health care reform provisions be halted in order to save money. Among the changes DHS wants to delay is the implementation of presumptive eligibility for children, in which Medicaid pays for services on the belief that the kids may be eligible for the program. The Department does not want to implement the dental only program in HAWK-I, presumptive eligibility for HAWK-I, paperless renewal, and premium assistance for the program.

A small number of programs were recommended to be eliminated. Among these is welfare reform funding for child abuse prevention programs, pregnancy prevention efforts, parental education programs like HOPES, and payments to counties for using county offices for DHS staff. General Fund appropriations that DHS wants to terminate include funding for the child care center for disabled children in Des Moines, services for children with autism in Linn County, and child care professional development programs.

Many of the changes would not be in compliance with current statutes and thus would appear to require legislative action. But discussions with the Governor’s office has revealed a belief that they do not have to get the Legislature’s approval. Such a move could provoke a bipartisan response from the Health and Human Services Appropriations subcommittee.